TESLA the nex DELOREAN? NO WAY JOSE!
TESLA the nex DELOREAN? NO WAY JOSE!
From the inception of TESLA motor’s IPO, many doubters have been comparing this company to the failures of other automotive companies such as Tucker and most notoriously, Delorean. Ever since the successful launch of Ford’s IPO over 60 years ago, approximately 5 other automotive companies have attempted to become the next big 4 of the American automotive industry—all have failed. It was from this premise that led many doubters to short TESLA stocks, betting that this new startup company would also meet the same fate as Delorean. However, as a historian and independent stock analyst, I am betting that TESLA will NOT meet the same fate as Delorean, but on the contrary, TESLA will be the next big 4. However, to understand why TESLA will succeed, we must first analyze why Delorean failed.
First let’s examine the company CEO
Delorean’s CEO was John Delorean. John Delorean quickly rose above the ranks in the automotive world and was making approximately $600,000 a year after bonuses at his peak (about $1.5 million in today’s money). Although Delorean had immense success while working with GM, we cannot compare his intellectual capability to that of ELon Musk, who is a certified Genius. By age 10, Musk was a self taught computer programmer and by age 12, had invented his first video game and sold it for $500. By the age of 28, Musk was a self made millionaire after selling his internet software publishing company known as Zip2 to Compaq for approximately $340 million in cash and stock options. If this isn’t enough to persuade you that Musk was destined for great accomplishments, his next big invention was PayPal, which sold to Ebay in 2002 for $1.5 BILLION.
Aside from being a brilliant entrepreneur and computer programmer, Musk is also a genius physicist who owns another business--a rocket company known as SpaceX. Currently Musk’s rocket company has billions of dollars in contracts from NASA, private satellite launches and the U.S military. SpaceX is the only private rocket company in the world that has successfully demonstrated its ability to dock with International Space Station. SpaceX has been so successful in building rockets, that it is capable of building its product efficiently enough to be less expensive than the entire Chinese government can; therefore, proving another of Musk strengths—his ability to innovate and invent. SpaceX currently owns the only known equipment in the world to build rockets so efficient that it will cost less if you contract with them rather than the Chinese.
It is through Musk’s genius that led him to create the TESLA Roadster, an electric car capable of zooming from the speed of 0-60 in 3.9 seconds, comparatively; Musk’s Roadster is faster than the Ferrari Modena Spider and F430 which clocks at 0-60 time of about 4 seconds. Imagine that! An electric car that’s faster than a Ferrari. Therefore, it’s through Elon’s genius and entrepreneur background that makes him a much more qualified engineer and CEO than John Delorean.
Delorean on the other hand was in financial trouble, he was indicted for being in a drug smuggling scheme to help finance his car company, this ultimately led to his company’s downfall as the company was in financial troubles. Delorean’s net worth was very minor compared to Musk, although a $600,000 annual salary was impressive, its nowhere comparable to Musk’s net worth which is somewhere in the billions. Another characteristic that sets Musk leagues apart from Delorean is Musk’s pulling power. When Musk talks, Washington listens, he is one of the best lobbyist and salesman to date, his presence commands attention. This was very much evident when SpaceX, a new startup company won contracts from NASA and U.S military when it competed in the ranks of Lockheed and Boeing. Even the state of California bent over backwards to lobby for Musk’s TESLA Motors to be stationed in the golden state. Presently if you buy a MODEL S in California, you will receive a $2,500 rebate check from the state and a HOV carpool pass. California also awarded TESLA $10,000,000 with incentive towards the production of it’s next vehicle—the model X. By the time Delorean had produce his first vehicle, the DMC-12, he was already in financial trouble. This is where we really draw the line between TESLA and Delorean. Despite being in financial trouble early on, Musk’s aggressive style investment in SpaceX, Solarcity and TESLA simultaneously proved to be a huge success. Clearly out of the woods in terms financial hardship, Musk led TESLA into the production of its 2[SUP]nd[/SUP] vehicle the MODEL S, and by next year the MODEL X, within 3 years the mass market 3[SUP]rd[/SUP] generation rumored to be known as “bluestar” will be available to the market around 30-40k. Presently, as of December 31, 2012, the MODEL S is virtually sold out with 19,983 anxious buyers.
Second, lets examine the Delorean DMC-12 to the TESLA Model S as both vehicles have comparable prices.
A Delorean DMC-12 would have cost you about $25,000 (which equates to about $63,000 in today’s money). However, take a closer look at a Delorean, and you will understand why this car was overpriced. First the Delorean 0-60 time clocked in at about 10.5 seconds by the Road&Track Magazine. While the TESLA Model S costing $52,000 base price (after rebates) has a 0-60 time of 6.5 seconds. Thus, the Delorean is a slow sports car at best, for the asking price Delorean was competing in the same market with faster sports cars such as Corvettes. The Model S, however, is in a class of its own, where else can you find a sleek sports luxury sedan capable of seating up to 7 passengers with sleek styling that runs on electric? Arguably, the Delorean DMC-12 was indeed a very stylish and sleek car during its time; however, asking 63k for a gas guzzling slow sports car is by the far not the right way of approaching the automotive market. The slow Delorean reportedly gets only 20MPG, thus further contributing it to failure. Why would anyone pay more for a slower vehicle that demands more Gas per miles of travel? This explains why Delorean reservations were extremely slow compared to that of the MODEL S. On the other hand, TESLA approached the automotive business by tapping into a new market. This market is one where the consumer would rather pay much less for MPG, instead of pumping gas into their cars, customers can fill up their battery with electricity—at a much cheaper cost. Furthermore, TESLA’s genius is that it ultimately was able to break the notion that electric cars are ugly, small and un-cool. By making the MODEL S fast, stylish, and roomy they are able to command higher prices for the vehicle. With a goal of only selling 20,000 Model S for 2013, TESLA is virtually sold out and the New Year has barely started TODAY.
Besides the cool, electric, stylish, spacious, luxury, and speed factor; the MODEL S has one more quality to it that the Delorean lacked—advance technology. The model S is the only car where it’s command center is a 17inch LCD touch screen. Not only is the touch screen an automotive marvel, it’s instantaneously responsive, smooth and more powerful than your IPAD. Additional tech such as regenerative GASING is available on the car; this means that the moment you release the gas pedal, the MODEL S immediately uses the kinetic energy to regenerate power into its batteries. The MODEL S also has better handling as the vehicle has a lower center of gravity, which gives the driver better control and less “roll” when the vehicle makes sharp turns.
Clearly, the MODEL S is worth the money for what the consumer is getting in return. Although only a small fraction of Americans can afford this car, TESLA claims that it would be profitable if 10,000 Model S are sold per year, a goal that appears within reach as production ramps up to 400 vehicles per week.
Third let’s examine the factories.
DeLorean’s factory was approximately 600,000 Square Foot set in Northern Ireland. It cannot possibly compare to TESLA’s NUMMI 5.3 million square foot plant set in America where it’s main customer base is located. The NUMMI plant is capable of producing up to 600,000 vehicles per year. TESLA bought the Nummi from a joint adventure of Toyota and GM. After buying the NUMMI plant, Tesla went to work and immediately sought after Detroit’s manufacturing tools and equipment during the downturn of the automotive industry and acquired those equipments for pennies on the dollar, saving TESLA billions of dollars in cash. Today, Tesla owns some of the world’s biggest aluminum stamping machines capable of producing hundreds of Model S per week at NUMMI. If you are curious about the NUMMI plant, I recommend you visit Youtube and type in the word “TESLA NATIONAL GEOGRAPHICS” and you will get a clearer understanding of production. No word or writing can convey what you will learn from watching this video, enjoy. I AM LONG TESLA
To me it seems to make more sense to put any arguments in their proper context, *before* using them to check your optimism.
